Business Editor’s Brief: The obscene rich list

KNIGHT FRANK and the WealthInsight — both UK-based companies that have a global reach — recently published a 2015 Global Wealth Report, which, in essence, said Zimbabwe’s ultra-high-networth individuals (UHNWI), or those that have a networth of over US$30 million, rose from 14 in 2004 to 26 in 2014.

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In addition, 12 new individuals were forecast to join the rank of Zimbabwe’s uber-rich by 2024. The report, however, didn’t give any names, or explain the methodologies used to come up with these conclusions. In other words, the ultimate science underpinning the conclusions of the report, which is curiously made from the ostensible assessment of more than 100 economies, is sorely missing.

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Conversely, rankings such as the Bloomberg Billionaires Index, for example, have a detailed analysis of how every person’s fortune is tallied.

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The measure is based on changes in markets, the economy and Bloomberg reporting. Each net worth figure is updated every business day at 5:30pm in New York. Stakes in publicly traded companies are valued using the share’s most recent closing price.

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Valuations are converted to US dollars at current exchange rates. On the other hand, closely held companies are valued by comparing the enterprise value-to-Ebitda (earnings before income, tax depreciation and amortisation) or price-to-earnings ratios of similar public companies.

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The criteria used depends on the company’s industry and size.

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Also, calculations of closely held company debt are based on the net debt-to-Ebitda ratios of comparable peers, which at face value seems to be a fair.

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Crucially, ownership of closely held private assets that cannot be verified are excluded from the list. Also no assumptions about personal debt are made, which essentially makes it disputable. Likewise, Forbes claims to have an elaborate method where its reporters extensively analyse public holdings and real estate.

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It tries to verify the information with the billionaires themselves, who often are economic with the truth. Analysts say while neither of the surveys is better than the other, they are agreed that neither is worse. The sheer amount of work that is involved gives the two surveys a modicum of integrity.

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In Africa and other emerging economies, where markets are still fledging, attempts to come up with a list of rich individuals is predictably risky business.

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Most often than not, individual investments are always masked under unclear investment vehicles that are headed by proxies.

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Happily, Zimbabwe’s Central Depository System (CSD), which will transparently warehouse individual holdings, will help solve this anomaly.

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But until then estimating the wealth of local individuals will remain a very taxing and controversial exercise — barring of course odd personalities who flaunt their wealth. Last week, we hazarded to publish a list of the country’s top 50 rich individuals done by X Research and Intelligence — a little-known local firm — knowing fully well that few would agree with it as it did not include the methodology used to determine the ranking.

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Ultimately, the list was published not because of its accuracy, which many understandably doubt, but because of its bravery: It is the first Zimbabwean research firm to attempt such a feat.

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Also, publishing it was not an endorsement and inviting people to critique it as we did was an acknowledgment that it was debatable. It obviously has shades of the Gorindemabwe Frontier’s controversial list of 100 influential young Zimbabweans.

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It is our reservations about the list that saw us issue a disclaimer, inviting feedback from our readers. There was little feedback on formal channels, but social media exploded. It literally “broke the Internet”. Most of the responses were pure vitriol. Even the messenger was not spared.

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Several lessons can be drawn from this, but what is not debatable is that there is need for investment in institutional capacities of local research institutions, including modernising local institutions, to ensure that their results are not only auditable, but transparent as well.

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Information, particularly that which refers to individuals, is always closely guarded.

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There is always an unproven assumption that if the information becomes public, then something unpleasant will visit the subject, which is unfortunate.

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Creating debate — not just mere debate, but quality debate — is of paramount importance if our society is to grow.

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. . . Readers’ feedback

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The Zim rich list published in The Sunday Mail refers. Surely that list cannot go unchallenged. What is required in any rich list are facts. Just look at the Forbes and Bloomberg billionaires lists they are based on facts or near facts as they look at the individuals known stakes in public and private companies. But the list published in The Sunday Mail appears to be based on a hunch. No formulae has been given whatsoever as a basis to come up with the list. Some notable individuals ignored include Billy Rautenbech, John Bredenkemp etc some of the wealthy white guys. No whites in the list; is there any explanation for that? Nigel Chanakira also is nowhere near the list, even the Dabengwa guy at MTN, Gomwe guy at Anglo. Whole lots of guys have been omitted. Even Uebert Angel, who was said to be worth over US$60 million, is not on the list (not that I actually believed that). I, however, have no qualms with the inclusion of Strive Masiyiwa and Shingi Mutasa. — Fidelis Taziwa.

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Most people on your list run small businesses, but again your list had me laughing all day yesterday. — Regis Gakaka.

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Hi, I have been looking at this list but to my surprise the late Comrade Mujuru is not on the list, suppose because he is late now. — Morgan.

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@DMusaru @SundayMailZim is renowned for better content than the T50 rich people joke! How have they calculated “my wealth”???? — ICT Minister Supa Mandiwanzira.

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@DMusaru is smoking something illegal to suggest am in T50 of rich people in Zim. A baseless article only fit for the lunatic fringe media. — ICT Minister Supa Mandiwanzira.